Computer systems and networks have facilitated the tasks of buying, selling and transferring goods both locally and in virtual environments. Credit card, debit card, smart card, eCheck, and other modes of purchase rely on sophisticated networks and devices that process proposed transactions rapidly so as not to frustrate the pace and consummation of regular consumer transactions for either the purchaser or the merchant. Technology advances have also allowed for a wider variety of devices and transaction types in retail and other marketplaces.
In many individual point of sale consumer transactions, payment choices are controlled by the purchaser, such as, for instance, a consumer, with the merchant having little role in such choices. That is, many merchants allow consumers and other purchasers to pay for goods or services by his or her choice of cash, check, debit card, eCheck, and/or several different types of credit cards, such as Visa, MasterCard, American Express, Discover, and the like. The merchant has little, if any, choice in the choice of tender type by the consumer. Recent developments in commerce have also seen more acceptance and use of even further payment methods, such as by accounts and devices promulgated by electronic commerce providers such as PayPal, Bank of America, Square, Intuit, Groupon, and Google, among others. The ability of consumers to select from numerous different payment types is one way that many merchants attract more business from more and a wider variety of consumers.
As is generally well known, payment systems can be centralized, decentralized or subject to virtual systems that connect end users, such as, for instance a payer and a receiver. These payment systems include open looped systems, such as checks and most credit card systems, where banks act as intermediaries between end parties and the payment system, as well as closed looped systems, such as Western Union and other proprietary services, where a typically, non-bank service provider, has a direct relationship with one or both end parties. Core payments systems include cards, an Automated Clearing House (“ACH”), checking, wire transfer and cash. Payments can be “push” payments, where money is sent, and “pull” payments, where money is taken. Examples of “push” payments include ACH “credits” and wires, and examples of “pull” payments include checks, cards and ACH “debits.” An ACH or other similar item can be used for such systems and other electronic networks to process large volumes of debit transactions in batches. The Electronic Payments Association (“NACHA”) manages the development, administration, and governance of the ACH Network, the backbone for the electronic movement of money and data (see, e.g., www.nacha.org). Some ACHs can offer same day service or processing for transactions (i.e., same day ACH), and global ACHs can facilitate more streamlined transactions across differing countries and currencies, such that interchange fees and delays are reduced or eliminated.
As is also generally well known, various payment card technologies can involve the use of magnetic stripe cards, smart cards, contactless and chip and pin cards, such as EMV cards. Also, rates and fees imposed for the use of a card may be impacted depending upon whether an actual card is present, which is referred to as “card present,” or not present, which is referred to as “card not present,” for a given transaction.
There are multiple stages in a transaction, such as the authorization step and the clearing and settlement step. In general, authorization is real time from a point of sale (“POS”), and involves conducting security and fraud checks, estimating risks, verifying funds or credit availability, and binding an actual card issuer for the use of funds. In general, clearing and settlement traditionally involves batch processing of many transactions at the end of the day, where the acquirer edits and forwards such items to various financial networks for sorting, computing of fees and routing to separate card issuers. The financial networks collect funds from the card issuers and pay the acquirers, such that the acquirers can move funds into individual merchant accounts. The card network defines interchange fees that are transferred from the merchant's acquiring bank to the cardholder's issuing bank. The interchange fee is typically set by the network and is non-negotiable. Further, it is often the largest component of any merchant discount fee. This is in contrast to the ACH, in which there are no interchange fees and no floats. Of course, various risks are involved where cards and financial systems of this nature are used, and the risks of fraud, liability and the like can shift depending upon whether magnetic stripe, contactless, chip, or other cards are instruments are used, as is generally well known.
It is generally well know that the responsibilities of the credit issuers can include posting transactions, funding settlements, managing credit, rewards and fraud losses, among other possible items. Similarly, it is well known that the responsibilities of the debit issuers can include authorizing and posting transactions and funding settlement, among other possible items.
Current acquiring ecosystems are also generally well known. A merchant typically has an agreement with an acquiring bank, which provides access to the financial network. The acquirer may provide options for front end authorization processing. The back end processing can include clearing and settlement functions. The infrastructure (hardware, software, etc.) is usually provided by the acquirer or arranged by the merchant.
Cross border payments are another feature of financial systems that arise when banks in different countries are used to facilitate given transactions. Such payments are generally governed by a series of bilateral agreements and arrangements between banks that agree to handle such transactions. Such arrangements have been traditionally limiting, are difficult to break into, and are generally outdated given new technologies and systems for facilitating electronic international commerce. Cross border payments typically involve transactions between multiple banks. For instance, on the sender's side, a settlement bank and a correspondent bank is involved and on the receiver's side a correspondent bank and the receiver's bank is involved. This type of correspondent banking is very profitable given fees, account balances and foreign exchange margins involved.
Unfortunately, such diversity of choice where electronic financial systems are used have traditionally benefited purchasers and not merchants. That is, many merchants are often forced to deal with a particular bank, financial institution or system to authorize and process many or all of the non-cash financial transactions accepted by any given merchant. As is generally well known, such relationships and systems are often established on a long term and inflexible contractual basis between a given merchant and a given bank or other back-end financial service provider. This tends to lock in many merchants to unfavorable or less favorable terms, however, as trends in financial markets and offerings might provide better terms at a later time or for particular transactions. Moreover, these fixed arrangement involve the use of expensive infrastructure (e.g., hardware, software and connectivity) that may be leased over a lengthy term, which further limits merchant choice on authorizer and processer.
Although many systems and methods for facilitating consumer payments using electronic systems have generally worked well in the past, there is always a desire for improvement. In particular, what is desired are systems and methods that provide for greater merchant flexibility in conducting consumer transactions using the electronic systems and networks of financial service providers. This flexibility, in turn, will foster a more efficient marketplace that results in benefits for the purchaser, merchant and financial service providers.